The mysteriously monikered Project Turquoise sent a shiver through the European exchange world last month by announcing that the big-bank-backed trading platform had chosen its plumbers: the US-based Depository Trust and Clearing Corporation for trade clearing and Citigroupfor settlement. (Broadly, clearing reduces the number of transactions by netting trades across participants and settlement consummates them.) Much like my itinerant parents who cannot occupy their new Florida home until the water pipes are working, traders cannot move orders to Turquoise until the clearing and settlement pipes are in place. This is a big deal in Europe, where lack of common or interoperable trade plumbing has been the biggest barrier to the emergence of an efficient pan-European trading market.

The US exchange world has had a single plumber, DTCC, available to all for over three decades. The result is plug-and-play trading systems and plenty of competition between them. Europe, on the other hand, is a morass of national settlement systems, some owned and controlled by a single national exchange, and a broken web of clearers - some national, some international; a few linked, most not. This has had a big impact on competition. The London Stock Exchange and Euronexthad a brief but bloody price war on Dutch stocks in 2004, thanks to use of a common clearer: LCH.Clearnet. However, virt-x, the UK platform now owned by the Swiss Exchange, was unable to make an effective run at German stocks because of Deutsche Börse denying access to the settlement provider Clearstream, bought in 2002.